Explosive rise in entitlements makes America unrecognizable

The breathtaking rise in entitlement payments over the past 50 years – nearly a 100-fold rise in nominal dollars between 1960-2010 – is placing an ever-larger strain on America’s taxpayers and their federal government, but the trend toward more and larger transfers potentially could endure for decades before Washington is ultimately forced to redress the crisis it has created, AEI scholar Nick Eberstadt said Tuesday.

The US is the wealthiest nation that ever existed, Eberstadt said, and that unprecedented wealth has made possible America’s ongoing and unbridled entitlement growth.

America’s political elites show no obvious appetite to get serious about constraining entitlements any time soon, Eberstadt asserted.

“We haven’t talked about it over the past three decades. We need desperately to talk about it, but there is a large consensus, I’m afraid, in both political parties, I believe, elected members of our Congress, to try to let the system go along as it has been, and this is kind of what we see out of this sequestration deal last year.”

Prospects for a broader national debate about the entitlement question during this year’s presidential race are not encouraging, Eberstadt said. Republican presidential candidate Mitt Romney’s recent on-camera comments about “the 47 percent” who do not pay income taxes, rely upon government entitlement benefits, view themselves as “victims” and would never vote for him has made it distinctly more difficult for lawmakers and politicians to engage in reasoned debate about the entitlements problem.

“(Romney) has made it easier than ever before not to have the discussion about entitlements now,” he said, arguing that a mocking reference to “the 47 percent” is all now anyone needs to laugh off and shut down attempts to discuss this topic.

But Eberstadt said the rise in transfers is no laughing matter – the aggregate total of transfer payments soared from about $24 billion in 1960 to $2.2 trillion in 2010, and has “completely inverted the performance of the US government from any way it had been recognized.”

Previewing, “Nation of Takers,” to be released Oct. 15, Eberstadt said his book “is about the explosive rise of entitlement payments in the United States over the last half century, and the way that has changed the federal government and I’m afraid American life and morés as well.”

Eberstadt fired off several sobering statistics from the book during a conference call with reporters:

— Entitlement outlays, after controlling for both inflation and population growth, grew by over 700 percent in 50 years. By 2010, the average per capita burden of entitlements for every man, woman and child was about $7,200 apiece, or nearly $29,000 for a notional family of four.

— In 1960, one dollar of every three taken in by the federal government was devoted to entitlements and two dollars were designated for governance. By 2010, this had reversed to one dollar for governance and two for entitlements.

— About half of Americans live in a household that receives one or more transfer payments.

— Almost half of American children are in households that receive one or more “means-tested” benefits.

— About 18 percent of all personal income received in the United States is through government transfer payments.

— Almost 12 million working-age Americans in 2010 were receiving one or more disability entitlement payments though entitlement programs, which is one for every 11.3 people of the same age with a job.

— Around 35 percent of Americans in 2011 lived in households that got one or more means-tested benefits, which is about twice as high as the rate in the early 1980s. “Times are pretty tough now but Americans are not twice as poor as they were in the Reagan years,” Eberstadt said. The official poverty rate “is not appreciably higher than it was 30 years ago,” but people who are less impoverished “are more likely to be inducted or accepting of payments from these programs.”

— The proportion of men in the US participating in the workforce during their peak earning years – the mid- to late-30s – is lower than in Greece, “which we think of in some circles as being kind of a poster child for the poor effects of the permanent welfare state in Europe,” Eberstadt said.

Eberstadt, who is AEI’s Henry Wendt chair in political economy, warned that the American “entitlement archipelago” may be less sustainable for longer than many analysts currently suspect – but only at an unsettling cost.

Entitlements, for example, could be permitted to crowd out personal and corporate borrowing, and current entitlement outlays could increasingly be financed by the unborn, who have no vote over these outlays, via deficit spending and public debt build-up..

Further, in holding entitlements sacrosanct, Americans may prove to be increasingly unwilling to provide the means for their own national defense. Already, Eberstadt said, entitlement spending may be inhibiting America’s willingness to pay for defense capabilities, under the argument that the US defense posture is “unaffordable.”

“Today, three dollars are being spent for every dollar of defense, and we are hearing that our defense expenditures have become unaffordable. I’m not in favor of $700 toilet seats more than anybody else is, and we may be spending too much on defense, but I don’t think we should be told that it’s ‘unaffordable.’ We are the richest country in history and defense expenditures are down to about less than 5 percent of our total national income, which is historically … very low, it’s less than half of the level what it was when Eisenhower was warning us about the military-industrial complex.” –30–